On Wednesday, Wells Fargo adjusted its stance on Allegion (NYSE:ALLE), a company known for its security products and solutions. The firm downgraded the stock from Overweight to Equal Weight, albeit with a slight increase in the price target to $140 from $139. This change reflects the analyst's view that while Allegion has recently performed well, the current stock price now offers only modest upside potential relative to the new target.
Allegion has been recognized for its robust performance in both non-residential (nonres) and residential (resi) sectors. The stock has seen a notable increase, climbing 22% since December, outpacing the average 11% rise in its peer group and the 8% gain in the Industrial Select Sector SPDR Fund (XLI). Despite this impressive growth, the consensus earnings per share (EPS) for 2024 has remained largely unchanged.
The analyst noted that the valuation of Allegion relative to its earnings before interest and minority interest (EEMI) has risen by 11%, aligning with the increase in its price-to-earnings (P/E) ratio over the same period. This valuation shift coincides with Honeywell (NASDAQ:HON)'s recent move to acquire the security business of Carrier Global (NYSE:CARR), which has alleviated some market concerns.
Another factor contributing to the positive outlook is that the non-residential sector's performance has not declined as much as previously anticipated. This development has helped clear a path for Allegion's continued success. With these considerations in mind, Wells Fargo has set the new price target at $140, placing Allegion's valuation nearly on par with its industry peers based on the 2024 price-to-free cash flow (P/FCF) metric.
InvestingPro Insights
Allegion's (NYSE:ALLE) recent performance has caught the attention of investors and analysts alike, as evidenced by its impressive 27.27% return over the last three months. This surge in value is supported by the company's solid financial metrics, including a robust revenue growth of 11.58% over the last twelve months as of Q1 2023. Moreover, Allegion's commitment to shareholder returns is highlighted by its consistent dividend growth, with the dividend yield standing at 1.45% as of the latest data.
InvestingPro Tips for Allegion suggest a mixed picture. On one hand, the company has raised its dividend for 10 consecutive years and maintained dividend payments for 11 consecutive years, underscoring its reliability for income-seeking investors. On the other hand, some caution may be warranted as two analysts have revised their earnings downwards for the upcoming period, and the stock is trading at a high P/E ratio relative to near-term earnings growth, currently at 21.22. Additionally, Allegion is trading at a high Price / Book multiple of 8.64, which might signal that the stock is valued richly in terms of its net assets.
For investors looking to delve deeper into Allegion's prospects, additional insights are available through InvestingPro, which includes a total of 9 InvestingPro Tips that can further inform investment decisions. To access these insights, a visit to https://www.investing.com/pro/ALLE is recommended. Plus, using the coupon code PRONEWS24 will grant an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing a valuable opportunity to stay ahead with comprehensive analysis and data.
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